Ares About Ares News Ares Management, L.P. Reports Second Quarter 2015 Results

Ares Management, L.P. Reports Second Quarter 2015 Results

Financial results for the quarter ended June 30, 2015

Aug112015

 

  • Total assets under management (“AUM”)1 increased to $87.5 billion, a 10.5% increase year over year

  • $2.7 billion in gross capital raised during the three months ended June 30, 2015 and $13.2 billion raised over the twelve months ended June 30, 2015

  • Fee related earnings were $46.5 million for the three months ended June 30, 2015, up 32.7% from the three months ended June 30, 2014

  • Economic net income was $76.0 million on a pre-tax basis and $0.32 per unit, net of tax, down 3.0% from the three months ended June 30, 2014

  • Distributable earnings were $73.0 million on a pre-tax basis and $0.28 per common unit, net of tax, up 55.6% from the three months ended June 30, 2014

  • Declared second quarter distribution of $0.26 per common unit compared to $0.18 for the second quarter of 2014

  • Second quarter net income attributable to Ares Management, L.P. was $12.1 million

 

LOS ANGELES—August 11, 2015—Ares Management, L.P.  (“the Company,” “Ares,” “we,” and “our”) (NYSE:ARES) today reported its financial results for the quarter ended June 30, 2015.

 

“Demand for our alternative investment solutions across our balanced investment platform remains very strong as we seek to raise a number of flagship funds over the next six to twelve months,” said Tony Ressler, Chairman and Chief Executive Officer of Ares. “Our first priority as asset managers is to perform for our investors, and our global platform, flexible strategies and investing advantages continue to enable us to find attractive investment opportunities despite the relatively challenging environment.”

 

“On July 23, 2015, we announced a merger with Kayne Anderson that we expect will make us better investors, provide access to new distribution channels and enhance our financial profile through the addition of long dated capital.” continued Tony Ressler.

 

Ares reported growth in AUM and Fee Earning Assets Under Management (“FEAUM”) of 10.5% and 11.4%, year over year, reaching $87.5 billion and $66.0 billion, respectively.  Second quarter gross capital raised totaled $2.7 billion primarily driven by new funds in the Tradable Credit and Direct Lending Groups.

 

“For the second quarter, we delivered excellent cash earnings and an attractive distribution for our unit holders as we achieved double digit year over year growth in many of our key AUM and earnings  metrics,” said Michael Arougheti, President of Ares. “We expect growth in our AUM and fee related earnings as we raise new flagship funds and deploy capital selectively over time, including our existing $10.1 billion in AUM not yet earning fees.”

 

Economic net income for the three months ended June 30, 2015 was $76.0 million compared to $75.1 million for the three months ended June 30, 2014. Second quarter economic net income, net of income taxes, was $68.5 million, or $0.32 per unit, compared to $70.0 million, or $0.33 per unit, for the second quarter of 2014 adjusted as if the reorganization related to our initial public offering (“IPO”) had taken place on April 1, 2014. Economic net income for the six months ended June 30, 2015 was $158.9 million, an increase of 4.2% compared to the six months ended June 30, 2014. For both periods, the increase in economic net income was primarily driven by increases in fee related earnings within the Private Equity, Direct Lending and Tradable Credit Groups and in net performance fees in the Direct Lending and Private Equity Groups. The increase was partially offset by a decline in net investment income within the Tradable Credit and Private Equity Groups.

 

Distributable earnings were $73.0 million for the three months ended June 30, 2015 compared to $48.6 million for the three months ended June 30, 2014. Distributable earnings were $140.3 million for the six months ended June 30, 2015 compared to $102.9 million for the six months ended June 30, 2014. For both periods, the increase was primarily driven by an increase in fee related earnings within the Private Equity, Direct Lending and Tradable Credit Groups and in realized net performance fees within the Tradable Credit Group. This increase was partially offset by a decline in realized investment income within the Tradable Credit Group.

 

For the second quarter ended June 30, 2015, distributable earnings after income taxes allocated to common unitholders were $22.9 million, or $0.28 per common unit. Ares declared a second quarter distribution of $0.26 per common unit payable on September 8, 2015 to common unitholders of record as of August 25, 2015.

 

Ares has also provided additional information in its Second Quarter 2015 Earnings Presentation, which can be viewed at www.aresmgmt.com under “Investor Resources – Presentations and Reports.”

 


 

  1. In this press release we refer to certain non-GAAP financial measures, including assets under management, fee earning assets under management, economic net income, fee related earnings, performance related earnings and distributable earnings. The definitions and reconciliations of these measures to the most directly comparable GAAP measures, where applicable, as well as an explanation of why we use these measures, are included in this press release.

  2. Total units outstanding represents the sum of common units and Ares Operating Group Units that are exchangeable for common units. See Exhibit F for more details.

 

 

ARES MANAGEMENT, L.P.

Key Performance Metrics as of June 30, 2015

 

($ in thousands, except unit data and as otherwise noted)

 

Three months ended
June 30,

 

%

 

Six months ended
June 30,

 

%

 

 

2015

 

2014(1)

 

Change

 

2015

 

2014

 

Change

Management Fees (includes ARCC Part I Fees of $29,250 and $25,666 for the three months ended June 30, 2015 and 2014, respectively and $58,292 and $53,984 for the six months ended June 30, 2015 and 2014, respectively)...............................................................

 

$160,487

 

$143,403

 

12%

 

$322,803

 

$283,264

 

14%

Admin. & Other Fees.................................................................

 

7,033

 

6,576

 

7%

 

14,383

 

13,441

 

7%

Compensation & Benefits (2)...................................................

 

(91,286)

 

(88,742)

 

3%

 

(185,217)

 

(179,096)

 

3%

General & Administrative Expenses (3)..................................

 

(29,746)

 

(26,198)

 

14%

 

(57,860)

 

(51,612)

 

12%

Fee Related Earnings...............................................................

 

$46,488

 

$35,040

 

33%

 

$94,110

 

$65,999

 

43%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Performance Fees...............................................................

 

$22,093

 

$18,647

 

19%

 

$49,790

 

$41,353

 

20%

Net Investment Income............................................................

 

7,396

 

21,364

 

(65%)

 

15,007

 

45,102

 

(67%)

Performance Related Earnings............................................

 

$29,489

 

$40,011

 

(26%)

 

$64,797

 

$86,455

 

(25%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income..............................................................

 

$75,977

 

$75,051

 

1%

 

$158,907

 

$152,454

 

4%

Economic Net Income After Income Taxes (4)...................

 

$68,506

 

$69,966

 

(2%)

 

$143,180

 

$142,441

 

1%

Economic Net Income After Income Taxes per Unit (4).

 

$0.32

 

$0.33

 

(3%)

 

$0.67

 

$0.67

 

0%

Distributable Earnings............................................................

 

$72,956

 

$48,553

 

50%

 

$140,251

 

$102,892

 

36%

Distributable Earnings After Income Taxes per Common Unit(5)......................................................................................................

 

$0.28

 

$0.18

 

56%

 

$0.54

 

$0.40

 

35%

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Incentives (Gross).......................................................

 

$598,979

 

$525,826

 

14%

 

$598,979

 

$525,826

 

14%

Accrued Incentives (Net)..........................................................

 

165,100

 

190,627

 

(13%)

 

165,100

 

190,627

 

(13%)

Total Fee Revenue (6)................................................................

 

182,580

 

162,050

 

13%

 

372,593

 

324,617

 

15%

Management Fees as a Percentage of Total Fee Revenue (6)..............................................................................................

 

87.9%

 

88.5%

 

-

 

86.6%

 

87.3%

 

-

 

(1)

Ares completed its IPO and related reorganization on May 7, 2014, and accordingly the financial results for the three and six months ended June 30, 2014 reported herein include the results of our predecessor owners.

(2)

Includes compensation and benefits expenses attributable to OMG of $27.0 million and $26.0 million for the three months ended June 30, 2015 and 2014, respectively, and $55.9 million and $53.6 million for the six months ended June 30, 2015 and 2014, respectively, which are not allocated to an operating segment.

(3)

Includes G&A expenses attributable to OMG of $16.0 million and $13.0 million for the three months ended June 30, 2015 and 2014, respectively, and $31.3 million and $26.5 million for the six months ended June 30, 2015 and 2014, respectively, which are not allocated to an operating segment.

(4)

For the three and six months ended June 30, 2014, represents pro forma results assuming Ares’ IPO and reorganization had taken place on January 1, 2014. Total units of 214,157,363 for the three months ended June 30, 2015, include both common units and Ares Operating Group Units that are exchangeable for common units on a one-for-one basis, and the dilutive effects of the Company’s equity-based awards.

(5)

Distributable earnings attributable to common unitholders is presented on a pro forma basis for the three and six months ending June 30, 2014 as if Ares’ IPO occurred on January 1, 2014. The per unit calculation uses total common units outstanding. See “Exhibit G. Per Unit Calculations For the Three Months Ended June 30, 2015” for more detail.

(6)

Total fee revenue is calculated as management fees plus net performance fees.

 

 

Management Fee Revenue. Management fee revenue increased by $17.1 million to $160.5 million for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. For the six months ended June 30, 2015, management fee revenue increased by $39.5 million to $322.8 million over the same period in 2014. The increase for both periods was primarily due to management fee contracts acquired in the EIF acquisition in the first quarter of 2015, additional capital raises by ARCC and additional capital deployment of Ares Capital Europe II (“ACE II”). The increase was partially offset by a decrease in management fees in the Real Estate Group as certain funds ended reinvestment periods, as well as a $1.6 million reduction in management fees for the three months ended June 30, 2015 and a $3.2 million reduction for the six months ended June 30, 2015 from the termination of previously acquired management fee contracts.

 

Compensation and Benefits. Compensation and benefits expenses increased by $2.5 million to $91.3 million for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. For the six months ended June 30, 2014, compensation and benefits expenses increased by $6.1 million to $185.2 million over the same period in 2014. Both increases were attributable to merit-based increases and increased headcount, including additional professionals from the Keltic, First Capital Holdings (“FCC”) and Energy Investors Funds (“EIF”) acquisitions.

 

General and Administrative Expenses. General and administrative expenses increased by $3.5 million to $29.7 million for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. For the six months ended June 30, 2014, general and administrative expenses increased by $6.2 million to $57.9 million over the same period in 2014. Both increases were primarily driven by additional occupancy and office expenses, growth in personnel and geographical expansion and expenses relating to the Keltic, FCC and EIF acquisitions.

 

Fee Related Earnings. FRE increased by $11.4 million, or 32.7%, to $46.5 million for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. FRE increased by $28.1 million, or 42.6%, to $94.1 million for the six months ended June 30, 2015 compared to the six months ended June 30, 2014. For both periods, the growth in FRE was attributable to management fee contracts acquired in the EIF acquisition and an increase in management fees within the Direct Lending and Tradable Credit Groups. The increase was partially offset by lower management fees in the Real Estate Group and an increase in compensation and benefits expenses in the Private Equity Group due to the EIF acquisition.

 

Performance Related Earnings. PRE was $29.5 million for the three months ended June 30, 2015 compared to $40.0 million for the three months ended June 30, 2014. PRE was $64.8 million for the six months ended June 30, 2015 compared to $86.5 million for the six months ended June 30, 2014.  For both periods, the decrease in PRE was primarily attributable to a decline in performance fees in the alternative credit funds within the Tradable Credit Group and reduced investment income from unrealized market depreciation of equity investments held in ACOF Asia within the Private Equity Group. The decrease was partially offset by an increase in net performance fees primarily from an increase in market appreciation in funds within the Direct Lending Group.

 

Economic Net Income. ENI was $76.0 million for the three months ended June 30, 2015 compared to $75.1 million for the three months ended June 30, 2014. The increase in ENI was driven by an increase in FRE of $11.4 million and in net performance fees of $3.4 million. The decrease was offset by a decline in net investment income of $14.0 million. ENI after provision for taxes was $68.5 million, or $0.32 per unit, for the three months ended June 30, 2015 compared to $70.0 million, or $0.33 per unit for the three months ended June 30, 2014. For the six months ended June 30, 2015, ENI was $158.9 million, compared to $152.5 million for the six months ended June 30, 2015. The increase in ENI was due to an increase in FRE of $28.1 million and in net performance fees of $8.4 million. The decrease was offset by a decline in net investment income of $30.1 million. ENI after provision for taxes was $143.2 million, or $0.67 per unit, for the six months ended June 30, 2015 compared to $142.4 million, or $0.67 per unit for the six months ended June 30, 2014.

 

Distributable Earnings. Total distributable earnings increased by $24.4 million to $73.0 million for the three months ended June 30, 2015 compared to the three months ended June 30, 2014. For the six months ended June 30, 2015, total distributable earnings increased by $37.4 million to $140.3 million compared to the six months ended June 30, 2014. For both periods, the increase was primarily driven by an increase in fee related earnings within the Private Equity, Direct Lending, and Tradable Credit Groups and in realized net performance fees within the Tradable Credit Group. This increase was partially offset by a decline in realized investment income within the Tradable Credit Group.

 

Accrued Incentives Fees. Net accrued incentive fees as of June 30, 2015 decreased by $25.5 million to $165.1 million compared to $190.6 million as of June 30, 2014. The decrease in net accrued incentive fees was primarily attributable to the realization of accrued fees within the Tradable Credit Group as a result of (i) the liquidation of certain long-only funds and (ii) the increased realization on certain alternative credit funds. This decrease was offset by an increase in accrued incentive fees from ACOF III and ACOF IV within the Private Equity Group, as a result of market appreciation of their investment portfolios.

 

Assets Under Management

 

($ in millions)

 

For the three
months ended
June 30, 2015

 

For the twelve
months ended
June 30, 2015

Beginning of Period AUM...................................................................................................

 

$86,926

 

$79,238

Acquisitions (1).........................................................................................................................

 

-

 

4,365

Commitments (2).....................................................................................................................

 

2,653

 

12,118

Capital Reduction (3)..............................................................................................................

 

(1,337)

 

(2,920)

Distribution (4)..........................................................................................................................

 

(1,993)

 

(5,579)

Change in Fund Value (5).......................................................................................................

 

1,272

 

300

End of Period AUM...............................................................................................................

 

$87,522

 

$87,522

Average AUM.........................................................................................................................

 

$87,224

 

$83,380

 

(1)

Represents AUM acquired via acquisition, net of terminated contracts.

(2)

Represents net new commitments during the period, including equity and debt commitments, reductions of previous commitments, and gross inflows into our open-ended managed accounts and sub-advised accounts, as well as equity offerings by our publicly traded vehicles.

(3)

Represents the permanent reduction in leverage during the period.

(4)

Represents distributions and redemptions net of recallable amounts.

(5)

Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency.

 

Total AUM was $87.5 billion as of June 30, 2015, an increase of $0.6 billion, or 0.7%, compared to total AUM of $86.9 billion as of March 31, 2015. For the three months ended June 30, 2015, the increase in AUM was primarily driven by net new commitments of $2.7 billion which mainly consisted of (i) $266.6 million in equity commitments to the Tradable Credit Group’s long-only credit funds, (ii) $541.6 million in equity commitments and $250.0 million in debt commitments to the Tradable Credit Group’s alternative funds and (iii) $1.5 billion in commitments to the Direct Lending Group’s funds (comprised of $691.5 million of equity commitments and $775.0 million of debt commitments). The increase in AUM was partially offset by capital reduction of $1.3 billion and distributions of $2.0 billion, of which $818.4 million was attributable to the Tradable Credit Group, $231.3 million was attributable to the Direct Lending Group, $510.1 million was attributable to the Private Equity Group and $433.1 million was attributable to the Real Estate Group.

 

Fee-Earning Assets Under Management

 

($ in millions)

 

For the three
months ended
June 30, 2015

 

For the twelve
months ended
June 30, 2015

Beginning of Period FEAUM.............................................................................................

 

$65,664

 

$59,244

Acquisitions (1).........................................................................................................................

 

-

 

3,881

Commitments (2).....................................................................................................................

 

436

 

5,748

Subscriptions / Deployment / Increase in Leverage (3).....................................................

 

2,054

 

6,531

Redemptions / Distributions / Decrease in Leverage (4)....................................................

 

(1,773)

 

(8,211)

Market Appreciation (5)..........................................................................................................

 

240

 

119

Change in Fee Basis (6)...........................................................................................................

 

(613)

 

(1,304)

End of Period FEAUM.........................................................................................................

 

$66,008

 

$66,008

Average FEAUM...................................................................................................................

 

$65,836

 

$62,626

 

(1)

Represents fee earning AUM acquired via acquisition.

(2)

Represents net new commitments during the period for funds that earn management fees based on committed capital.

(3)

Represents subscriptions, capital deployment and increase in leverage (for funds that earn fees on a gross asset basis).

(4)

Represents redemptions, distributions and decrease in leverage (for funds that earn fees on a gross asset basis).

(5)

Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency for funds that earn management fees based on market value.

(6)

Represents the change in fee basis from committed capital to invested capital or from net to gross basis and includes a reduction in change in fee basis of $347 million to reflect fee earning AUM as of the end of each period presented.

 

Total Fee Earning Assets Under Management (“FEAUM”) was $66.0 billion as of June 30, 2015, an increase of $0.3 billion, or 0.5%, compared to total FEAUM of $65.7 billion as of March 31, 2015.  The increase in FEAUM was primarily driven by subscriptions / deployment / increase in leverage of $2.1 billion, which was mainly comprised of $952.8 million and $831.2 million in the Tradable Credit Group and the Direct Lending Group, respectively.  Net new commitments of $436.2 million, primarily comprised of $277.9 million in the Tradable Credit Group and $135.0 million in the Direct Lending Group further added to the increase in FEAUM. Partially offsetting the increase in FEAUM were redemptions / distributions / decreases in leverage of $1.8 billion, primarily driven by a decrease of $1.1 billion in the Tradable Credit Group.

 

Incentive Generating AUM and Incentive Eligible AUM

 

($ in millions)

 

 

 

As of June 30, 2015

 

As of March 31, 2015

 

 

 

Incentive
Generating AUM

 

Incentive Eligible
AUM

 

Incentive
Generating AUM

 

Incentive Eligible
AUM

 

Tradable Credit Group.....................................

 

$1,225

 

$6,933

 

$3,917

 

$7,002

 

Direct Lending Group......................................

 

11,112

 

15,428

 

10,813

 

14,500

 

Private Equity Group.......................................

 

7,391

 

9,809

 

7,346

 

9,809

 

Real Estate Group............................................

 

2,094

 

6,171

 

2,074

 

6,240

 

Total................................................................

 

$21,821

 

$38,340

 

$24,150

 

$37,551

 

 

Total Incentive Generating AUM (“IGAUM”) was $21.8 billion as of June 30, 2015, a decrease of 9.6%, compared to total IGAUM of $24.2 billion as of March 31, 2015.  The decrease was primarily attributable to unrealized depreciation in our Tradable Credit Group’s credit opportunities strategy.

 

Total Incentive Eligible AUM (“IEAUM”) was $38.3 billion as of June 30, 2015, compared to IEAUM of $37.6 billion as of March 31, 2015.  Significant funds not yet contributing incentive fees as of June 30, 2015 included Ares European Real Estate Fund III, Ares European Real Estate Fund IV, Ares Commercial Real Estate Corporation, Ares Special Situations Fund IV and Ares European Loan Opportunities Fund.

 

Available Capital and Assets Under Management Not Yet Earning Fees

 

($ in millions)

 

 

 

As of June 30, 2015

 

As of March 31, 2015

 

 

 

Available
Capital

 

AUM Not Yet
Earning Fees

 

Available
Capital

 

AUM Not Yet
Earning Fees

 

Tradable Credit Group..........................................

 

$5,278

 

$2,352

 

$6,153

 

$2,558

 

Direct Lending Group...........................................

 

6,015

 

5,768

 

5,544

 

5,397

 

Private Equity Group............................................

 

3,641

 

923

 

3,577

 

909

 

Real Estate Group.................................................

 

3,390

 

1,058

 

3,580

 

1,255

 

Total.....................................................................

 

$18,324

 

$10,101

 

$18,854

 

$10,119

 

 

Total available capital was $18.3 billion as of June 30, 2015, a decrease of 2.8%, compared to $18.9 billion as of March 31, 2015. The decrease was primarily due to a reduction in leverage in one of the Tradable Credit Group’s credit opportunities funds.

 

Total AUM Not Yet Earning Fees was $10.1 billion as of June 30, 2015, consistent with March 31, 2015.

 

Results Excluding Consolidated Funds

 

Net income of the Company excluding the effect of the Consolidated Funds for the three months ended June 30, 2015 was $38.8 million.

 

 

Investment Capacity and Liquidity

 

As of June 30, 2015, our cash and cash equivalents were $101.5 million, investments at fair value were $610.0 million, and net performance fees receivable were $165.1 million.  As of June 30, 2015, the Company had a $1.03 billion revolving credit facility, with approximately $980.0 million in available capital.

 

 

($ in thousands)

 

As of
June 30, 2015

 

As of
December 31, 2014

 

 

 

 

 

 

 

Cash and cash equivalents...................

 

$101,533

 

$148,858

 

Investments..........................................

 

610,026

 

598,074

 

Debt obligations...................................

 

293,779

 

243,491

 

Net performance fees receivable..........

 

165,100

 

166,934

 

Distribution

 

We declared a quarterly distribution of $0.26 per common unit to common unitholders of record at the close of business on August 25, 2015, payable on September 8, 2015.

 

Recent Developments

 

  • In July 2015 we announced the pricing of an $813.6 million cash flow collateralized loan obligation (“CLO”).  Net proceeds from the issuance will be used to invest predominately in bank loans.  The transaction is expected to close in September 2015 and will represent the firm’s second CLO raised in 2015 and the third largest in the firm’s history.

 

  • On July 23, 2015, we and Kayne Anderson Capital Advisors, L.P. (“KACALP”) announced that Ares Holdings L.P. (“Ares Holdings”), Ares Investments L.P. (“Ares Investments”), KACALP and KA Fund Advisors, LLC (together with KACALP, “Kayne Anderson”) have entered into a definitive business combination and merger agreement with pursuant to which Ares Holdings and Ares Investments will acquire the equity interests of Kayne Anderson.  Following the closing of the transactions, we will be renamed Ares Kayne Management, L.P. and will be one of the largest and most diversified alternative asset managers. Under the terms of the agreement, Ares Holdings and Ares Investments will provide $2.55 billion in consideration to the owners of Kayne Anderson, the majority of which will be in the form of Ares Operating Group Units. The transaction is expected to close on or around January 1, 2016, subject to customary regulatory approvals, certain Kayne Anderson investor consents and other closing conditions.

 

  • On July 16, 2015, we held the first closing for our third commingled European direct lending fund with total fund commitments to date of €1.4 billion. The target size for this fund is €2.0 billion.

 

Conference Call and Webcast Information

 

On August 11, 2015, the Company invites all interested persons to attend its webcast/conference call at 12:00 p.m. (Eastern Time) to discuss its second quarter 2015 financial results.

 

All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Resources section of our website at . Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing (888) 317-6003. International callers can access the conference call by dialing +1 (412) 317-6061. All callers will need to enter the Participant Elite Entry Number 6478767 followed by the # sign and reference “Ares Management, L.P.” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected. For interested parties, an archived replay of the call will be available through September 9, 2015 to domestic callers by dialing (877) 344-7529 and to international callers by dialing +1 (412) 317-0088. For all replays, please reference conference number 10068954. An archived replay will also be available through September 9, 2015 on a webcast link located on the Home page of the Investor Resources section of our website.

 

About Ares Management, L.P.

 

Ares is a publicly traded, leading global alternative asset manager with approximately $88 billion of assets under management as of June 30, 2015 and more than 15 offices in the United States, Europe and Asia. Since its inception in 1997, Ares has adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns throughout market cycles. Ares believes each of its four distinct but complementary investment groups in Tradable Credit, Direct Lending, Private Equity and Real Estate is a market leader based on assets under management and investment performance. Ares was built upon the fundamental principle that each group benefits from being part of the greater whole.

 

Forward-Looking Statements

 

Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Ares Management, L.P. undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call.

 

Nothing in this press release constitutes an offer to sell or solicitation of an offer to buy any securities of Ares or an investment fund managed by Ares or its affiliates.

 

Available Information

 

Ares Management, L.P.’s filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available on its website at www.aresmgmt.com.  The contents of such website are not and should not be deemed to be incorporated by reference herein.

 

Contact

 

Ares Management, L.P.

 

Carl Drake
(800) 340-6597

 

 

Appendix

 

Exhibit A.  Operating Segments as of June 30, 2015

($ in millions)

 

 

 

Available
Capital

 

Fair Value of
Capital

 

AUM

 

Tradable Credit Group.............................................................

 

$5,278

 

$27,386

 

$32,664

 

Direct Lending Group..............................................................

 

6,015

 

24,184

 

30,199

 

Private Equity Group...............................................................

 

3,641

 

11,067

 

14,708

 

Real Estate Group....................................................................

 

3,390

 

6,561

 

9,950

 

Total........................................................................................

 

$18,324

 

$69,198

 

$87,522

 

 

Exhibit B.  Segment Results

($ in thousands)

 

As of and for the three months ended June 30, 2015:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees (includes ARCC Part I Fees of $29,250).

 

$37,851

 

$70,330

 

$36,373

 

$15,935

 

$160,487

 

$—

 

$160,487

Administrative fees and other income................................

 

24

 

75

 

36

 

729

 

864

 

6,167

 

7,033

Compensation and benefits..............................................

 

(10,914)

 

(32,122)

 

(11,226)

 

(9,992)

 

(64,254)

 

(27,032)

 

(91,286)

General, administrative and other expenses.........................

 

(3,571)

 

(3,254)

 

(3,200)

 

(3,708)

 

(13,733)

 

(16,013)

 

(29,746)

Fee related earnings (loss).............................................

 

23,390

 

35,029

 

21,983

 

2,964

 

83,366

 

(36,878)

 

46,488

Performance fees—realized...............................................

 

37,988

 

2,093

 

18,878

 

102

 

59,061

 

 

59,061

Performance fees—unrealized...........................................

 

(46,142)

 

19,967

 

41,863

 

3,887

 

19,575

 

 

19,575

Performance fee compensation—realized.............................

 

(21,364)

 

(1,254)

 

(15,102)

 

 

(37,720)

 

 

(37,720)

Performance fee compensation—unrealized.........................

 

27,216

 

(11,063)

 

(33,795)

 

(1,182)

 

(18,824)

 

 

(18,824)

Net performance fees.......................................................

 

(2,302)

 

9,743

 

11,844

 

2,807

 

22,093

 

 

22,093

Investment income (loss)—realized...................................

 

6,211

 

(308)

 

3,105

 

255

 

9,263

 

 

9,263

Investment income (loss)—unrealized................................

 

(9,190)

 

2,657

 

2,085

 

953

 

(3,495)

 

 

(3,495)

Interest and other investment income.................................

 

3,742

 

191

 

1,330

 

18

 

5,281

 

 

5,281

Interest expense.............................................................

 

(1,216)

 

(519)

 

(1,658)

 

(260)

 

(3,654)

 

 

(3,654)

Net investment income (loss)...........................................

 

(453)

 

2,021

 

4,862

 

966

 

7,396

 

 

7,396

Performance related earnings (loss)................................

 

(2,754)

 

11,764

 

16,706

 

3,773

 

29,489

 

 

29,489

Economic net income (loss)............................................

 

$20,636

 

$46,793

 

$38,689

 

$6,737

 

$112,855

 

$(36,878)

 

$75,977

Distributable earnings (loss)..........................................

 

$47,051

 

$34,554

 

$28,242

 

$2,090

 

$111,937

 

$(38,981)

 

$72,956

Total assets..................................................................

 

$391,161

 

$255,228

 

$934,560

 

$169,233

 

$1,750,182

 

$18,291

 

$1,768,473

 

As of and for the three months ended June 30, 2014:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees (includes ARCC Part I Fees of $25,666).

 

$36,072

 

$64,805

 

$22,610

 

$19,916

 

$143,403

 

$—

 

$143,403

Administrative fees and other income................................

 

33

 

276

 

94

 

1,496

 

1,899

 

4,678

 

6,576

Compensation and benefits..............................................

 

(10,453)

 

(32,753)

 

(7,886)

 

(11,689)

 

(62,781)

 

(25,961)

 

(88,742)

General, administrative and other expenses.........................

 

(3,897)

 

(2,245)

 

(2,738)

 

(4,332)

 

(13,212)

 

(12,986)

 

(26,198)

Fee related earnings (loss).............................................

 

21,755

 

30,083

 

12,080

 

5,391

 

69,309

 

(34,269)

 

35,040

Performance fees—realized...............................................

 

24,283

 

 

4,615

 

 

28,898

 

 

28,898

Performance fees—unrealized...........................................

 

(11,618)

 

3,600

 

42,002

 

7,726

 

41,710

 

 

41,710

Performance fee compensation—realized.............................

 

(15,986)

 

 

(3,690)

 

 

(19,676)

 

 

(19,676)

Performance fee compensation—unrealized.........................

 

3,180

 

(2,075)

 

(32,824)

 

(566)

 

(32,284)

 

 

(32,284)

Net performance fees.......................................................

 

(141)

 

1,525

 

10,103

 

7,160

 

18,647

 

 

18,647

Investment income (loss)—realized...................................

 

6,568

 

(934)

 

2,647

 

(301)

 

7,980

 

 

7,980

Investment income (loss)—unrealized................................

 

(2,533)

 

216

 

11,861

 

635

 

10,179

 

 

10,179

Interest and other income.................................................

 

4,328

 

144

 

584

 

187

 

5,243

 

 

5,243

Interest expense.............................................................

 

(543)

 

(332)

 

(785)

 

(378)

 

(2,037)

 

 

(2,037)

Net investment income (loss)...........................................

 

7,820

 

(906)

 

14,307

 

143

 

21,364

 

 

21,364

Performance related earnings........................................

 

7,679

 

619

 

24,410

 

7,303

 

40,011

 

 

40,011

Economic net income (loss)............................................

 

$29,434

 

$30,702

 

$36,490

 

$12,694

 

$109,320

 

$(34,269)

 

$75,051

Distributable earnings (loss)..........................................

 

$38,852

 

$28,205

 

$14,994

 

$2,343

 

$84,394

 

$(35,841)

 

$48,553

Total assets..................................................................

 

$577,397

 

$199,527

 

$547,980

 

$295,433

 

$1,620,337

 

$10,560

 

$1,630,898

 

 

Exhibit B.  Segment Results (continued)

($ in thousands)

 

As of and for the six months ended June 30, 2015:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees (includes ARCC Part I Fees of $58,292).................................................................

 

$75,460

 

$141,069

 

$72,962

 

$33,313

 

$322,803

 

$—

 

$322,803

Administrative fees and other income........................

 

45

 

152

 

49

 

1,585

 

1,831

 

12,552

 

14,383

Compensation and benefits........................................

 

(19,803)

 

(65,798)

 

(23,547)

 

(20,123)

 

(129,271)

 

(55,946)

 

(185,217)

General, administrative and other expenses...............

 

(7,402)

 

(6,548)

 

(6,318)

 

(6,253)

 

(26,521)

 

(31,339)

 

(57,860)

Fee related earnings (loss)........................................

 

48,300

 

68,875

 

43,146

 

8,522

 

168,843

 

(74,733)

 

94,110

Performance fees—realized........................................

 

71,313

 

3,982

 

19,303

 

102

 

94,700

 

 

94,700

Performance fees—unrealized....................................

 

(73,834)

 

28,458

 

129,194

 

4,206

 

88,024

 

 

88,024

Performance fee compensation—realized...................

 

(41,234)

 

(2,387)

 

(15,442)

 

 

(59,063)

 

 

(59,063)

Performance fee compensation—unrealized...............

 

46,770

 

(16,086)

 

(103,776)

 

(779)

 

(73,873)

 

 

(73,873)

Net performance fees.................................................

 

3,015

 

13,967

 

29,279

 

3,529

 

49,790

 

 

49,790

Investment income (loss)—realized...........................

 

13,433

 

1,088

 

7,277

 

387

 

22,185

 

 

22,185

Investment income (loss)—unrealized.......................

 

(10,716)

 

814

 

643

 

1,149

 

(8,110)

 

 

(8,110)

Interest and other investment income.........................

 

2,003

 

404

 

5,815

 

47

 

8,269

 

 

8,269

Interest expense.........................................................

 

(2,424)

 

(1,045)

 

(3,338)

 

(530)

 

(7,338)

 

 

(7,338)

Net investment income (loss).....................................

 

2,296

 

1,261

 

10,397

 

1,053

 

15,007

 

 

15,007

Performance related earnings (loss).........................

 

5,311

 

15,228

 

39,676

 

4,582

 

64,797

 

 

64,797

Economic net income (loss).......................................

 

$53,611

 

$84,103

 

$82,822

 

$13,104

 

$233,640

 

$(74,733)

 

$158,907

Distributable earnings (loss).....................................

 

$88,177

 

$69,135

 

$55,328

 

$5,472

 

$218,112

 

$(77,861)

 

$140,251

Total assets................................................................

 

$391,161

 

$255,228

 

$934,560

 

$169,233

 

$1,750,182

 

$18,291

 

$1,768,473

 

 

As of and for the six months ended June 30, 2014:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees (includes ARCC Part I Fees of $53,984).................................................................

 

$69,765

 

$131,009

 

$45,806

 

$36,684

 

$283,264

 

$—

 

$283,264

Administrative fees and other income........................

 

50

 

366

 

170

 

2,786

 

3,372

 

10,071

 

13,441

Compensation and benefits........................................

 

(21,258)

 

(64,965)

 

(16,081)

 

(23,174)

 

(125,478)

 

(53,618)

 

(179,096)

General, administrative and other expenses...............

 

(7,593)

 

(4,159)

 

(4,738)

 

(8,600)

 

(25,090)

 

(26,522)

 

(51,612)

Fee related earnings (loss)........................................

 

40,964

 

62,251

 

25,157

 

7,696

 

136,068

 

(70,069)

 

65,999

Performance fees—realized........................................

 

34,495

 

39

 

17,700

 

 

52,234

 

 

52,234

Performance fees—unrealized....................................

 

1,892

 

5,893

 

63,344

 

10,675

 

81,804

 

 

81,804

Performance fee compensation—realized...................

 

(21,492)

 

(28)

 

(14,162)

 

 

(35,682)

 

 

(35,682)

Performance fee compensation—unrealized...............

 

(3,176)

 

(3,525)

 

(49,736)

 

(566)

 

(57,003)

 

 

(57,003)

Net performance fees.................................................

 

11,719

 

2,379

 

17,146

 

10,109

 

41,353

 

 

41,353

Investment income (loss)—realized...........................

 

24,586

 

(1,532)

 

3,779

 

429

 

27,262

 

 

27,262

Investment income (loss)—unrealized.......................

 

(15,400)

 

1,739

 

27,017

 

(227)

 

13,129

 

 

13,129

Interest and other income...........................................

 

4,579

 

243

 

3,368

 

197

 

8,386

 

 

8,386

Interest expense.........................................................

 

(930)

 

(636)

 

(1,407)

 

(703)

 

(3,676)

 

 

(3,676)

Net investment income (loss).....................................

 

12,835

 

(186)

 

32,757

 

(304)

 

45,102

 

 

45,102

Performance related earnings..................................

 

24,554

 

2,193

 

49,903

 

9,805

 

86,455

 

 

86,455

Economic net income (loss).......................................

 

$65,518

 

$64,444

 

$75,060

 

$17,501

 

$222,523

 

$(70,069)

 

$152,454

Distributable earnings (loss).....................................

 

$79,556

 

$59,212

 

$33,637

 

$3,841

 

$176,246

 

$(73,354)

 

$102,892

Total assets................................................................

 

$577,397

 

$199,527

 

$547,980

 

$295,433

 

$1,620,337

 

$10,560

 

$1,630,898

 

Exhibit C.  Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials)

($ in thousands, except unit data)

 

 

 

 

As of June 30,
2015

 

As of December 31,
2014

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents................................................................................................................................................................................................

 

$101,533

 

$148,858

 

Restricted cash and cash equivalents.............................................................................................................................................................................

 

 

32,734

 

Investments...........................................................................................................................................................................................................................

 

218,138

 

174,052

 

Derivative assets, at fair value.........................................................................................................................................................................................

 

1,594

 

7,623

 

Performance fees receivable..............................................................................................................................................................................................

 

162,770

 

187,059

 

Due from affiliates...............................................................................................................................................................................................................

 

126,037

 

146,534

 

Other assets...........................................................................................................................................................................................................................

 

62,231

 

58,716

 

Intangible assets, net...........................................................................................................................................................................................................

 

103,736

 

40,948

 

Goodwill................................................................................................................................................................................................................................

 

144,210

 

85,582

 

Assets of Consolidated Funds:

 

 

 

 

 

Cash and cash equivalents................................................................................................................................................................................................

 

1,381,296

 

1,314,397

 

Investments, at fair value...................................................................................................................................................................................................

 

17,847,829

 

19,123,950

 

Loans held for investment, net........................................................................................................................................................................................

 

 

77,514

 

Due from affiliates...............................................................................................................................................................................................................

 

9,474

 

11,342

 

Dividends and interest receivable..................................................................................................................................................................................

 

83,279

 

81,331

 

Receivable for securities sold..........................................................................................................................................................................................

 

191,434

 

132,753

 

Derivative assets, at fair value.........................................................................................................................................................................................

 

3,447

 

3,126

 

Other assets...........................................................................................................................................................................................................................

 

6,652

 

12,473

 

Total assets....................................................................................................................................................................................................................

 

$20,443,660

 

$21,638,992

 

Liabilities

 

 

 

 

 

Accounts payable and accrued expenses......................................................................................................................................................................

 

$124,904

 

$101,310

 

Accrued compensation.......................................................................................................................................................................................................

 

82,166

 

129,433

 

Derivative liabilities, at fair value..................................................................................................................................................................................

 

2,967

 

2,850

 

Due to affiliates....................................................................................................................................................................................................................

 

7,410

 

19,030

 

Performance fee compensation payable.........................................................................................................................................................................

 

433,012

 

380,268

 

Debt obligations..................................................................................................................................................................................................................

 

293,779

 

243,491

 

Equity compensation put option liability...................................................................................................................................................................

 

20,000

 

20,000

 

Deferred tax liability, net..................................................................................................................................................................................................

 

21,276

 

19,861

 

Liabilities of Consolidated Funds:

 

 

 

 

 

Accounts payable and accrued expenses......................................................................................................................................................................

 

51,389

 

68,589

 

Due to affiliates....................................................................................................................................................................................................................

 

2,415

 

2,441

 

Payable for securities purchased.....................................................................................................................................................................................

 

262,137

 

618,902

 

Derivative liabilities, at fair value..................................................................................................................................................................................

 

58,014

 

42,332

 

Securities sold short, at fair value...................................................................................................................................................................................

 

3,493

 

3,763

 

Deferred tax liability, net..................................................................................................................................................................................................

 

24,524

 

22,214

 

CLO loan obligations.........................................................................................................................................................................................................

 

11,790,706

 

12,049,170

 

Fund borrowings..................................................................................................................................................................................................................

 

565,664

 

777,600

 

Mezzanine debt.....................................................................................................................................................................................................................

 

405,717

 

378,365

 

Total liabilities............................................................................................................................................................................................................

 

14,149,573

 

14,879,619

 

Commitments and contingencies

 

 

 

 

 

Redeemable interest in Consolidated Funds...................................................................................................................................................................

 

550,783

 

1,037,450

 

Redeemable interest in Ares Operating Group entities..............................................................................................................................................

 

24,023

 

23,988

 

Non-controlling interest in Consolidated Funds:

 

 

 

 

 

Non-controlling interest in Consolidated Funds.......................................................................................................................................................

 

4,902,757

 

4,988,729

 

Equity appropriated for Consolidated Funds.............................................................................................................................................................

 

57,569

 

(37,926)

 

Non-controlling interest in Consolidated Funds....................................................................................................................................................

 

4,960,326

 

4,950,803

 

Non-controlling interest in Ares Operating Group entities......................................................................................................................................

 

473,380

 

463,493

 

Controlling interest in Ares Management, L.P.:

 

 

 

 

 

Partners’ Capital (80,676,127 units and 80,667,664 units, issued and outstanding at June 30, 2015 and December 31, 2014, respectively).......................................................................................................................................................................................................

 

286,655

 

285,025

 

Accumulated other comprehensive income (loss).....................................................................................................................................................

 

(1,080)

 

(1,386)

 

Total controlling interest in Ares Management, L.P......................................................................................................................................

 

285,575

 

283,639

 

Total equity...................................................................................................................................................................................................................

 

5,719,281

 

5,697,935

 

Total liabilities, redeemable interest, non-controlling interests and equity..........................................................................................

 

$20,443,660

 

$21,638,992

 

 

 

 

Exhibit C.  Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials) (continued)

($ in thousands, except unit data)

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $29,250, $58,292 and $25,666, $53,984 for the three and six months ended June 30, 2015 and 2014, respectively)..........................................................................................

 

$134,732

 

$114,426

 

$270,121

 

$224,975

 

Performance fees..................................................................................................

 

34,134

 

11,175

 

74,194

 

27,389

 

Other fees.............................................................................................................

 

6,926

 

6,017

 

13,205

 

12,882

 

Total revenues................................................................................................

 

175,792

 

131,618

 

357,520

 

265,246

 

Expenses..................................................................................................................

 

 

 

 

 

 

 

 

 

Compensation and benefits...................................................................................

 

99,085

 

150,970

 

200,936

 

246,663

 

Performance fee compensation.............................................................................

 

56,544

 

51,960

 

132,936

 

92,685

 

General, administrative and other expenses..........................................................

 

53,331

 

39,460

 

98,878

 

78,235

 

Consolidated Funds’ expenses.............................................................................

 

7,834

 

16,712

 

22,906

 

25,649

 

Total expenses................................................................................................

 

216,794

 

259,102

 

455,656

 

443,232

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and other investment income....................................................................

 

4,334

 

6,897

 

4,676

 

7,021

 

Interest expense....................................................................................................

 

(3,654)

 

(2,037)

 

(7,338)

 

(3,676)

 

Other income (expense), net.................................................................................

 

(1,263)

 

(3,020)

 

(1,593)

 

(3,020)

 

Net realized gain (loss) on investments................................................................

 

3,312

 

(1,403)

 

10,076

 

(1,469)

 

Net change in unrealized appreciation (depreciation) on investments...................

 

(1,936)

 

9,703

 

1,540

 

13,849

 

Interest and other investment income of Consolidated Funds...............................

 

214,060

 

203,338

 

552,246

 

548,683

 

Interest expense of Consolidated Funds...............................................................

 

(114,722)

 

(203,741)

 

(233,433)

 

(348,783)

 

Net realized gain (loss) on investments of Consolidated Funds...........................

 

111,740

 

47,840

 

50,304

 

102,805

 

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...............................................................................................................

 

81,896

 

261,396

 

380,988

 

328,740

 

Total other income.........................................................................................

 

293,767

 

318,973

 

757,466

 

644,150

 

Income before taxes..............................................................................................

 

252,765

 

191,489

 

659,330

 

466,164

 

Income tax expense (benefit)................................................................................

 

7,387

 

5,267

 

13,279

 

(1,428)

 

Net income......................................................................................................

 

245,378

 

186,222

 

646,051

 

467,592

 

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds.....................................................................................

 

(4,084)

 

13,413

 

11,775

 

50,461

 

Less: Net income attributable to non-controlling interests in Consolidated Funds.............................................................................................................

 

210,643

 

170,140

 

541,952

 

358,273

 

Less: Net income (loss) attributable to redeemable interests in Ares Operating Group entities................................................................................................

 

185

 

(23)

 

428

 

383

 

Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities..............................................................................

 

26,548

 

(15,150)

 

61,354

 

40,633

 

Net income attributable to Ares Management, L.P.............................................

 

$12,086

 

$17,842

 

$30,542

 

$17,842

 

Net income attributable to Ares Management, L.P. per common unit

 

 

 

 

 

 

 

 

 

Basic............................................................................................................

 

$0.15

 

$0.22

 

$0.37

 

$0.22

 

Diluted.........................................................................................................

 

$0.15

 

$0.22

 

$0.37

 

$0.22

 

Weighted-average common units

 

 

 

 

 

 

 

 

 

Basic............................................................................................................

 

80,671,316

 

79,424,077

 

80,669,527

 

79,424,077

 

Diluted.........................................................................................................

 

81,720,919

 

80,004,833

 

80,669,527

 

80,004,833

 

Distributions declared per common unit.............................................................

 

$0.25

 

N/A

 

$0.49

 

N/A

 

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules

($ in thousands, except unit data)

 

 

 

As of June 30, 2015

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents...............................................................................

 

$101,533

 

$—

 

$—

 

$101,533

Investments.....................................................................................................

 

610,026

 

 

(391,888)

 

218,138

Derivative assets, at fair value..........................................................................

 

1,594

 

 

 

1,594

Performance fees receivable.............................................................................

 

598,979

 

 

(436,209)

 

162,770

Due from affiliates...........................................................................................

 

146,124

 

 

(20,087)

 

126,037

Other assets.....................................................................................................

 

62,271

 

 

(40)

 

62,231

Intangible assets, net........................................................................................

 

103,736

 

 

 

103,736

Goodwill..........................................................................................................

 

144,210

 

 

 

144,210

Assets of Consolidated Funds

 

 

 

 

 

 

 

 

Cash and cash equivalents...............................................................................

 

 

1,381,296

 

 

1,381,296

Investments.....................................................................................................

 

 

17,847,829

 

 

17,847,829

Due from affiliates...........................................................................................

 

 

11,464

 

(1,990)

 

9,474

Dividends and interest receivable.....................................................................

 

 

83,279

 

 

83,279

Receivable for securities sold...........................................................................

 

 

191,434

 

 

191,434

Derivative assets, at fair value..........................................................................

 

 

3,447

 

 

3,447

Other assets.....................................................................................................

 

 

6,652

 

 

6,652

Total assets.................................................................................................

 

$1,768,473

 

$19,525,401

 

$(850,214)

 

$20,443,660

Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses..........................................................

 

$126,028

 

$—

 

$(1,124)

 

$124,904

Accrued compensation.....................................................................................

 

82,166

 

 

 

82,166

Derivative liabilities, at fair value.....................................................................

 

2,967

 

 

 

2,967

Due to affiliates................................................................................................

 

7,924

 

 

(514)

 

7,410

Performance fee compensation payable...........................................................

 

433,879

 

 

(867)

 

433,012

Debt obligations...............................................................................................

 

293,779

 

 

 

293,779

Equity compensation put option liability..........................................................

 

20,000

 

 

 

20,000

Deferred tax liability, net..................................................................................

 

21,276

 

 

 

21,276

Liabilities of Consolidated Funds

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities.................................

 

 

51,821

 

(432)

 

51,389

Due to affiliates................................................................................................

 

 

65,645

 

(63,230)

 

2,415

Payable for securities purchased......................................................................

 

 

262,137

 

 

262,137

Derivative liabilities, at fair value.....................................................................

 

 

58,014

 

 

58,014

Securities sold short, at fair value....................................................................

 

 

3,493

 

 

3,493

Deferred tax liability, net..................................................................................

 

 

24,524

 

 

24,524

CLO loan obligations.......................................................................................

 

 

11,858,758

 

(68,052)

 

11,790,706

Fund borrowings..............................................................................................

 

 

565,664

 

 

565,664

Mezzanine debt................................................................................................

 

 

405,717

 

 

405,717

Total liabilities............................................................................................

 

988,019

 

13,295,773

 

(134,219)

 

14,149,573

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable interest in Consolidated Funds........................................................

 

 

550,783

 

 

550,783

Redeemable interest in Ares Operating Group entities......................................

 

24,023

 

 

 

24,023

Non-controlling interest in Consolidated Funds:

 

 

 

 

 

 

 

 

Non-controlling interest in Consolidated Funds...............................................

 

 

5,621,276

 

(718,519)

 

4,902,757

Equity appropriated for Consolidated Funds....................................................

 

 

57,569

 

 

57,569

Non-controlling interest in Consolidated Funds........................................

 

 

5,678,845

 

(718,519)

 

4,960,326

Non-controlling interest in Ares Operating Group entities................................

 

473,380

 

 

 

473,380

Controlling interest in Ares Management, L.P.:

 

 

 

 

 

 

 

 

Partners’ Capital (80,676,127 units issued and outstanding)............................

 

286,655

 

 

 

286,655

Accumulated other comprehensive gain (loss).................................................

 

(3,605)

 

 

2,525

 

(1,080)

Total controlling interest in Ares Management, L.P......................................

 

283,050

 

 

2,525

 

285,575

Total equity.....................................................................................................

 

756,430

 

5,678,845

 

(715,994)

 

5,719,281

Total liabilities, redeemable interests, non-controlling interests and equity..

 

$1,768,473

 

$19,525,401

 

$(850,214)

 

$20,443,660

 

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

As of December 31, 2014

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents.................................................................................

 

$148,858

 

$—

 

$—

 

$148,858

Restricted cash and cash equivalents..................................................................

 

32,734

 

 

 

32,734

Investments.......................................................................................................

 

598,074

 

 

(424,022)

 

174,052

Derivative assets, at fair value............................................................................

 

7,623

 

 

 

7,623

Performance fees receivable...............................................................................

 

548,098

 

 

(361,039)

 

187,059

Due from affiliates.............................................................................................

 

166,225

 

 

(19,691)

 

146,534

Other assets.......................................................................................................

 

58,809

 

 

(93)

 

58,716

Intangible assets, net..........................................................................................

 

40,948

 

 

 

40,948

Goodwill............................................................................................................

 

85,582

 

 

 

85,582

Assets of Consolidated Funds

 

 

 

 

 

 

 

 

Cash and cash equivalents.................................................................................

 

 

1,314,397

 

 

1,314,397

Investments, at fair value...................................................................................

 

 

19,123,950

 

 

19,123,950

Loans held for investment, net...........................................................................

 

 

77,514

 

 

77,514

Due from affiliates.............................................................................................

 

 

13,262

 

(1,920)

 

11,342

Dividends and interest receivable.......................................................................

 

 

81,331

 

 

81,331

Receivable for securities sold.............................................................................

 

 

132,753

 

 

132,753

Derivative assets, at fair value............................................................................

 

 

3,126

 

 

3,126

Other assets.......................................................................................................

 

 

12,473

 

 

12,473

Total assets...................................................................................................

 

$1,686,951

 

$20,758,806

 

$(806,765)

 

$21,638,992

Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses............................................................

 

$101,912

 

$—

 

$(602)

 

$101,310

Accrued compensation.......................................................................................

 

129,433

 

 

 

129,433

Derivative liabilities, at fair value.......................................................................

 

2,850

 

 

 

2,850

Due to affiliates..................................................................................................

 

19,881

 

 

(851)

 

19,030

Performance fee compensation payable.............................................................

 

381,164

 

 

(896)

 

380,268

Debt obligations.................................................................................................

 

243,491

 

 

 

243,491

Equity compensation put option liability............................................................

 

20,000

 

 

 

20,000

Deferred tax liability, net....................................................................................

 

19,861

 

 

 

19,861

Liabilities of Consolidated Funds

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities...................................

 

 

68,674

 

(85)

 

68,589

Due to affiliates..................................................................................................

 

 

63,417

 

(60,976)

 

2,441

Payable for securities purchased........................................................................

 

 

618,902

 

 

618,902

Derivative liabilities, at fair value.......................................................................

 

 

42,332

 

 

42,332

Securities sold short, at fair value......................................................................

 

 

3,763

 

 

3,763

Deferred tax liability, net....................................................................................

 

 

22,214

 

 

22,214

CLO loan obligations.........................................................................................

 

 

12,120,842

 

(71,672)

 

12,049,170

Fund borrowings................................................................................................

 

 

777,600

 

 

777,600

Mezzanine debt..................................................................................................

 

 

378,365

 

 

378,365

Total liabilities..............................................................................................

 

918,592

 

14,096,109

 

(135,082)

 

14,879,619

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable interest in Consolidated Funds

 

 

1,037,450

 

 

1,037,450

Redeemable interest in Ares Operating Group entities........................................

 

23,988

 

 

 

23,988

Non-controlling interest in Consolidated Funds:

 

 

 

 

 

 

 

 

Non-controlling interest in Consolidated Funds.................................................

 

 

5,663,172

 

(674,443)

 

4,988,729

Equity appropriated for Consolidated Funds......................................................

 

 

(37,926)

 

 

(37,926)

Non-controlling interest in Consolidated Funds..........................................

 

 

5,625,246

 

(674,443)

 

4,950,803

Non-controlling interest in Ares Operating Group entities..................................

 

463,493

 

 

 

463,493

Controlling interest in Ares Management, L.P.:

 

 

 

 

 

 

 

 

Partners’ Capital (80,667,664 units issued and outstanding)..............................

 

285,025

 

 

 

285,025

Accumulated other comprehensive gain (loss)...................................................

 

(4,146)

 

 

2,760

 

(1,386)

Total controlling interest in Ares Management, L.P........................................

 

280,879

 

 

2,760

 

283,639

Total equity.......................................................................................................

 

744,372

 

5,625,246

 

(671,683)

 

5,697,935

Total liabilities, redeemable interests, non-controlling interests and equity...

 

$1,686,951

 

$20,758,806

 

$(806,765)

 

$21,638,992

 

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

For the Three Months Ended June 30, 2015

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $29,250).......

 

$160,487

 

$—

 

$(25,755)

 

$134,732

Performance fees................................................................................

 

76,616

 

 

(42,482)

 

34,134

Other fees.............................................................................................

 

7,033

 

 

(107)

 

6,926

Total revenues...............................................................................

 

244,136

 

 

(68,344)

 

175,792

Expenses

 

 

 

 

 

 

 

 

Compensation and benefits..............................................................

 

99,085

 

 

 

99,085

Performance fee compensation.......................................................

 

56,544

 

 

 

56,544

General, administrative and other expense....................................

 

53,331

 

 

 

53,331

Consolidated Fund expenses............................................................

 

 

36,390

 

(28,556)

 

7,834

Total expenses...............................................................................

 

208,960

 

36,390

 

(28,556)

 

216,794

Other income (expense)

 

 

 

 

 

 

 

 

Interest and other investment income............................................

 

7,269

 

 

(2,935)

 

4,334

Interest expense..................................................................................

 

(3,654)

 

 

 

(3,654)

Other income (expense), net.............................................................

 

(1,991)

 

 

728

 

(1,263)

Net realized gain (loss) on investments...........................................

 

9,365

 

 

(6,053)

 

3,312

Net change in unrealized appreciation (depreciation) on investments.....................................................................................

 

(1,576)

 

 

(360)

 

(1,936)

Interest and other investment income of Consolidated Funds..

 

 

214,195

 

(135)

 

214,060

Interest expense of Consolidated Funds........................................

 

 

(116,775)

 

2,053

 

(114,722)

Net realized gain (loss) on investments of Consolidated Funds

 

 

111,740

 

 

111,740

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...........................................

 

 

82,046

 

(150)

 

81,896

Total other income (expense).....................................................

 

9,413

 

291,206

 

(6,852)

 

293,767

Income before taxes..........................................................................

 

44,589

 

254,816

 

(46,640)

 

252,765

Income tax expense (benefit)...........................................................

 

5,772

 

1,615

 

 

7,387

Net income...........................................................................................

 

38,817

 

253,201

 

(46,640)

 

245,378

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds................................................................

 

 

(6,030)

 

1,946

 

(4,084)

Less: Net income attributable to non-controlling interests in Consolidated Funds................................................................

 

 

259,229

 

(48,586)

 

210,643

Less: Net income attributable to redeemable interests in Ares Operating Group entities.................................................

 

185

 

 

 

185

Less: Net income attributable to non-controlling interests in Ares Operating Group entities............................................

 

26,548

 

 

 

26,548

Net income attributable to Ares Management, L.P...................

 

$12,086

 

$—

 

$—

 

$12,086

 

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

For the Three Months Ended June 30, 2014

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $25,666).......

 

$143,403

 

$—

 

$(28,977)

 

$114,426

Performance fees................................................................................

 

63,825

 

 

(52,650)

 

11,175

Other fees.............................................................................................

 

6,576

 

 

(559)

 

6,017

Total revenues...............................................................................

 

213,804

 

 

(82,186)

 

131,618

Expenses

 

 

 

 

 

 

 

 

Compensation and benefits..............................................................

 

150,970

 

 

 

150,970

Performance fee compensation.......................................................

 

51,960

 

 

 

51,960

General, administrative and other expense....................................

 

39,460

 

 

 

39,460

Consolidated Fund expenses............................................................

 

 

49,692

 

(32,980)

 

16,712

Total expenses...............................................................................

 

242,390

 

49,692

 

(32,980)

 

259,102

Other income (expense)

 

 

 

 

 

 

 

 

Interest and other investment income............................................

 

7,923

 

 

(1,026)

 

6,897

Interest expense..................................................................................

 

(2,037)

 

 

 

(2,037)

Other income (expense), net.............................................................

 

(3,020)

 

 

 

 

(3,020)

Net realized gain (loss) on investments...........................................

 

7,980

 

 

(9,383)

 

(1,403)

Net change in unrealized appreciation (depreciation) on investments.....................................................................................

 

17,297

 

 

(7,594)

 

9,703

Interest and other investment income of Consolidated Funds..

 

 

203,464

 

(126)

 

203,338

Interest expense of Consolidated Funds........................................

 

 

(205,766)

 

2,025

 

(203,741)

Net realized gain (loss) on investments of Consolidated Funds

 

 

47,840

 

 

47,840

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...........................................

 

 

261,257

 

139

 

261,396

Total other income (expense).....................................................

 

28,143

 

306,795

 

(15,965)

 

318,973

Income before taxes..........................................................................

 

(443)

 

257,103

 

(65,171)

 

191,489

Income tax expense...........................................................................

 

(3,112)

 

8,379

 

 

5,267

Net income......................................................................................

 

2,669

 

248,724

 

(65,171)

 

186,222

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds................................................................

 

 

15,447

 

(2,034)

 

13,413

Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds.................................................................

 

 

233,277

 

(63,137)

 

170,140

Less: Net income (loss) attributable to redeemable interests in Ares Operating Group entities............................................

 

(23)

 

 

 

(23)

Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities..............................................

 

(15,150)

 

 

 

(15,150)

Net income attributable to Ares Management, L.P...................

 

$17,842

 

$—

 

$—

 

$17,842

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)


 

 

For the Six Months Ended June 30, 2015

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $58,292)....................

 

$322,803

 

$—

 

$(52,682)

 

$270,121

Performance fees.....................................................................................

 

179,714

 

 

(105,520)

 

74,194

Other fees................................................................................................

 

14,383

 

 

(1,178)

 

13,205

Total revenues...................................................................................

 

516,900

 

 

(159,380)

 

357,520

Expenses

 

 

 

 

 

 

 

 

Compensation and benefits......................................................................

 

200,936

 

 

 

200,936

Performance fee compensation................................................................

 

132,936

 

 

 

132,936

General, administrative and other expense...............................................

 

98,878

 

 

 

98,878

Consolidated Fund expenses...................................................................

 

 

84,961

 

(62,055)

 

22,906

Total expenses...................................................................................

 

432,750

 

84,961

 

(62,055)

 

455,656

Other income (expense)

 

 

 

 

 

 

 

 

Interest and other investment income.......................................................

 

13,302

 

 

(8,626)

 

4,676

Interest expense.......................................................................................

 

(7,338)

 

 

 

(7,338)

Other income (expense), net....................................................................

 

(5,044)

 

 

3,451

 

(1,593)

Net realized gain (loss) on investments...................................................

 

22,287

 

 

(12,211)

 

10,076

Net change in unrealized appreciation (depreciation) on investments......

 

(5,202)

 

 

6,742

 

1,540

Interest and other investment income of Consolidated Funds..................

 

 

552,571

 

(325)

 

552,246

Interest expense of Consolidated Funds..................................................

 

 

(239,409)

 

5,976

 

(233,433)

Net realized gain (loss) on investments of Consolidated Funds..............

 

 

50,304

 

 

50,304

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...........................................................................

 

 

388,798

 

(7,810)

 

380,988

Total other income (expense)...........................................................

 

18,005

 

752,264

 

(12,803)

 

757,466

Income before taxes.................................................................................

 

102,155

 

667,303

 

(110,128)

 

659,330

Income tax expense (benefit)...................................................................

 

9,831

 

3,448

 

 

13,279

Net income.............................................................................................

 

92,324

 

663,855

 

(110,128)

 

646,051

Less: Net income attributable to redeemable interests in Consolidated Funds.................................................................................................

 

 

12,189

 

(414)

 

11,775

Less: Net income attributable to non-controlling interests in Consolidated Funds.........................................................................

 

 

651,666

 

(109,714)

 

541,952

Less: Net income attributable to redeemable interests in Ares Operating Group entities...................................................................................

 

428

 

 

 

428

Less: Net income attributable to non-controlling interests in Ares Operating Group entities................................................................

 

61,354

 

 

 

61,354

Net income attributable to Ares Management, L.P...........................

 

$30,542

 

$—

 

$—

 

$30,542

 

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

 

For the Six Months Ended June 30, 2014

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $53,984)....................

 

$283,264

 

$—

 

$(58,289)

 

$224,975

Performance fees.....................................................................................

 

124,305

 

 

(96,916)

 

27,389

Other fees................................................................................................

 

13,441

 

 

(559)

 

12,882

Total revenues...................................................................................

 

421,010

 

 

(155,764)

 

265,246

Expenses

 

 

 

 

 

 

 

 

Compensation and benefits......................................................................

 

246,663

 

 

 

246,663

Performance fee compensation................................................................

 

92,685

 

 

 

92,685

General, administrative and other expense...............................................

 

78,235

 

 

 

78,235

Consolidated Fund expenses...................................................................

 

 

90,329

 

(64,680)

 

25,649

Total expenses...................................................................................

 

417,583

 

90,329

 

(64,680)

 

443,232

Other income (expense)

 

 

 

 

 

 

 

 

Interest and other investment income.......................................................

 

11,406

 

 

(4,385)

 

7,021

Interest expense.......................................................................................

 

(3,676)

 

 

 

(3,676)

Other income (expense), net....................................................................

 

(3,020)

 

 

 

 

(3,020)

Net realized gain (loss) on investments...................................................

 

27,261

 

 

(28,730)

 

(1,469)

Net change in unrealized appreciation (depreciation) on investments......

 

22,862

 

 

(9,013)

 

13,849

Interest and other investment income of Consolidated Funds..................

 

 

548,940

 

(257)

 

548,683

Interest expense of Consolidated Funds..................................................

 

 

(351,503)

 

2,720

 

(348,783)

Net realized gain (loss) on investments of Consolidated Funds..............

 

 

102,805

 

 

102,805

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...........................................................................

 

 

327,670

 

1,070

 

328,740

Total other income (expense)...........................................................

 

54,833

 

627,912

 

(38,595)

 

644,150

Income before taxes.................................................................................

 

58,260

 

537,583

 

(129,679)

 

466,164

Income tax expense.................................................................................

 

(598)

 

(830)

 

 

(1,428)

Net income.........................................................................................

 

58,858

 

538,413

 

(129,679)

 

467,592

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds.........................................................................

 

 

56,226

 

(5,765)

 

50,461

Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds........................................................................

 

 

482,187

 

(123,914)

 

358,273

Less: Net income attributable to redeemable interests in Ares Operating Group entities...................................................................................

 

383

 

 

 

383

Less: Net income attributable to non-controlling interests in Ares Operating Group entities................................................................

 

40,633

 

 

 

40,633

Net income attributable to Ares Management, L.P...........................

 

$17,842

 

$—

 

$—

 

$17,842

 

Exhibit E.  Reconciliation from Segments to GAAP Financials

($ in thousands)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

(Dollars in thousands)

Economic net income:

 

 

 

 

 

 

 

 

Income before taxes................................................................................

 

$252,765

 

$191,489

 

$659,330

 

$466,164

Adjustments

 

 

 

 

 

 

 

 

Amortization of intangibles.................................................................

 

16,646

 

6,718

 

27,538

 

15,549

Depreciation expense..........................................................................

 

1,949

 

1,748

 

3,222

 

3,807

Equity compensation expenses...........................................................

 

7,798

 

62,228

 

15,719

 

67,568

Acquisition-related expenses..............................................................

 

571

 

1,292

 

2,795

 

2,713

Merger-related expenses.....................................................................

 

2,955

 

 

2,955

 

Placement fees and underwriting costs...............................................

 

1,462

 

3,506

 

4,507

 

4,558

OMG expenses, net............................................................................

 

36,878

 

34,269

 

74,733

 

70,069

Other non-cash items..........................................................................

 

 

 

10

 

Income (loss) before taxes of non-controlling interests in Consolidated Funds, net of eliminations..............................................................

 

(208,174)

 

(191,932)

 

(557,175)

 

(407,904)

Total consolidation adjustments and reconciling items............................

 

(139,910)

 

(82,169)

 

(425,690)

 

(243,641)

Economic net income............................................................................

 

112,855

 

109,320

 

233,640

 

222,523

Total performance fee income—realized.................................................

 

(59,061)

 

(28,898)

 

(94,700)

 

(52,234)

Total performance fee income—unrealized.............................................

 

(19,575)

 

(41,710)

 

(88,024)

 

(81,804)

Total performance fee compensation expense—realized.........................

 

37,720

 

19,676

 

59,063

 

35,682

Total performance fee compensation expense—unrealized.....................

 

18,824

 

32,284

 

73,873

 

57,003

Net investment income............................................................................

 

(7,396)

 

(21,364)

 

(15,007)

 

(45,102)

Fee related earnings..............................................................................

 

$83,366

 

$69,309

 

$168,843

 

$136,068

Management fees....................................................................................

 

$160,487

 

$143,403

 

$322,803

 

$283,264

Administrative fees and other income.....................................................

 

864

 

1,899

 

1,831

 

3,372

Compensation and benefits.....................................................................

 

(64,254)

 

(62,781)

 

(129,271)

 

(125,478)

General, administrative and other expenses.............................................

 

(13,733)

 

(13,212)

 

(26,521)

 

(25,090)

Fee related earnings..............................................................................

 

$83,366

 

$69,309

 

$168,843

 

$136,068

Distributable earnings:

 

 

 

 

 

 

 

 

Income before taxes................................................................................

 

$252,765

 

$191,489

 

$659,330

 

$466,164

Adjustments:

 

 

 

 

 

 

 

 

Amortization of intangibles.................................................................

 

16,646

 

6,718

 

27,538

 

15,549

Equity compensation expenses...........................................................

 

7,798

 

62,228

 

15,719

 

67,568

OMG distributable loss......................................................................

 

38,981

 

35,841

 

77,861

 

73,354

Non-cash acquisition-related expenses...............................................

 

336

 

 

1,587

 

Merger-related expenses.....................................................................

 

2,955

 

 

2,955

 

Taxes paid...........................................................................................

 

(906)

 

(347)

 

(1,385)

 

(554)

Dividend equivalent............................................................................

 

(961)

 

 

(1,872)

 

Other non-cash items..........................................................................

 

(253)

 

 

(409)

 

Income (loss) before taxes of non-controlling interests in Consolidated Funds, net of eliminations..............................................................

 

(208,174)

 

(191,932)

 

(557,175)

 

(407,904)

Unrealized performance fees...............................................................

 

(19,575)

 

(41,710)

 

(88,024)

 

(81,804)

Unrealized performance fee compensation..........................................

 

18,824

 

32,284

 

73,873

 

57,003

Unrealized investment and other income (loss)...................................

 

3,495

 

(10,179)

 

8,110

 

(13,129)

Distributable earnings..........................................................................

 

$111,937

 

$84,394

 

$218,112

 

$176,246

 

Exhibit F.  Weighted Average Units Outstanding as of June 30, 2015

 

 

 

Units Outstanding

 

Adjusted Common
Units Outstanding

 

Ares Management, L.P. Common Units................................................................

 

80,671,316

 

80,671,316

 

Ares Operating Group Units exchangeable into Common Units............................

 

132,436,444

 

 

Dilutive Effect of Unvested Restricted Common Units(1)...........................................................

 

1,049,603

 

397,380(2)

 

Dilutive Effect of Unvested Options......................................................................

 

 

 

Total......................................................................................................................

 

214,157,363

 

81,068,696

 

 

(1)

For the three months ended June 30, 2015, we apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted units to be settled in common units and options to acquire common units. Under the treasury stock method, compensation expense attributed to future services and not yet recognized is presumed to be used to acquire outstanding common units, thus reducing the weighted-average number of units and the dilutive effect of these awards.

(2)

Represent proportional dilutive impact based upon the percentage of the Ares Operating Group owned by Ares Management, L.P. (37.86%).

 

Exhibit G.  Per Unit Calculations ($ in thousands, except per unit data)

 

 

 

 

Q2-15

 

Q1-15

 

Q4-14

 

Q3-14

 

Pro Forma
Q2-14
(1)

After Tax Economic Net Income per Unit

 

 

 

 

 

 

 

 

 

 

Economic Net Income Before Taxes...............................................................

 

$75,977

 

$82,930

 

$64,696

 

$72,055

 

$75,051

Less: Entity Level Foreign, State and Local Taxes.................................

 

906

 

479

 

1,155

 

626

 

348

Economic Net Income After Entity Level, Foreign, State and Local Taxes........................................................................................................

 

75,071

 

$82,451

 

$63,541

 

$71,429

 

$74,699

x Tax Rate..............................................................................................

 

8.7%

 

9.4%

 

10.7%

 

5.7%

 

6.3%

Less: Income Tax Provision (2)............................................................................................................

 

6,565

 

7,776

 

6,813

 

4,061

 

4,733

After Tax Economic Net Income.................................................................

 

$68,506

 

$74,675

 

$56,728

 

$67,368

 

$69,966

After Tax Economic Net Income per Unit Outstanding...........................

 

$0.32

 

$0.35

 

$0.27

 

$0.32

 

$0.33

 

 

 

 

 

 

 

 

 

 

 

After Tax Economic Net Income per Common Unit

 

 

 

 

 

 

 

 

 

 

Economic Net Income After Entity Level, Foreign, State and Local Taxes....

 

$75,071

 

$82,451

 

$63,541

 

$71,429

 

$74,699

x Common Ownership Percentage.........................................................

 

37.86%

 

37.85%

 

38.14%

 

38.12%

 

38.12%

Economic Net Income Attributable to Common Unitholders..........................

 

$28,422

 

$31,211

 

$24,235

 

$27,229

 

$28,475

x Tax Rate..............................................................................................

 

23.1%

 

24.9%

 

28.1%

 

14.9%

 

16.6%

Less: Income Tax Provision (2)............................................................................................................

 

6,565

 

7,776

 

6,813

 

4,061

 

4,733

After Tax Economic Net Income Attributable to Common Unitholders..................................................................................................................

 

$21,856

 

$23,435

 

$17,422

 

$23,168

 

$23,742

After Tax Economic Net Income per Adjusted Common Unit................

 

$0.27

 

$0.29

 

$0.22

 

$0.29

 

$0.29

 

 

 

 

 

 

 

 

 

 

 

Distributable Earnings per Unit

 

 

 

 

 

 

 

 

 

 

Distributable Earnings.....................................................................................

 

$73,862

 

$67,774

 

$65,693

 

$65,950

 

$48,900

Less: Entity Level Foreign, State and Local Tax....................................

 

906

 

479

 

1,155

 

626

 

348

Distributable Earnings After Entity Level Foreign, State and Local Tax............................................................................................................

 

$72,956

 

$67,295

 

$64,538

 

$65,324

 

$48,553

x Common Ownership Percentage.........................................................

 

37.86%

 

37.85%

 

38.14%

 

38.12%

 

38.12%

Distributable Earnings Attributable to Common Unitholders..........................

 

$27,621

 

$25,473

 

$24,615

 

$24,902

 

$18,508

Less: Current Provision for Income Taxes(3)...............................................................

 

4,714

 

4,513

 

3,423

 

3,788

 

4,115

Distributable Earnings After Tax Attributable to Common Unitholders..............................................................................................

 

$22,906

 

$20,960

 

$21,192

 

$21,113

 

$14,393

Distributable Earnings per Common Unit Outstanding..........................

 

$0.28

 

$0.26

 

$0.26

 

$0.26

 

$0.18

Actual Distribution per Common Unit Outstanding

 

$0.26

 

$0.25

 

$0.24

 

$0.24

 

$0.18

 

(1)

For financial reporting prior to the IPO, certain numbers have been adjusted to assume an IPO effective date of January 1, 2014 to provide comparative results.

 

 

(2)

The provision for income taxes on ENI was calculated by multiplying (1) Ares Management, L.P.’s share of ENI that is subject to corporate level taxes (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary and its share of other deductible items) by (2) the Company’s assumed corporate tax rate.

 

 

(3)

The provision for income taxes on DE represents the current provision for income taxes on pre-tax net income or loss (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary), adjusted to reflect Ares Management, L.P.’s current ownership percentage of the Company’s tax paying corporate subsidiaries.

 

Exhibit H. Glossary of Terms

 

ARCC Part I Fees

 

ARCC Part I Fees refers to fees based on ARCC’s net investment income (before giving effect to ARCC Part I Fees and fees based on ARCC’s net capital gains, (“ARCC Part II Fees”)).

 

Ares Operating Group Units

 

Ares Operating Group Units refer, collectively, to a partnership unit in each of the Ares Operating Group entities, which include Ares Holdings L.P., Ares Domestic Holdings L.P., Ares Offshore Holdings L.P., Ares Investments L.P. and Ares Real Estate Holdings L.P.

 

Assets Under Management

 

Assets Under Management (or “AUM”) refers to the assets of our funds. For our funds other than CLOs, our AUM represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). For our funds that are CLOs, our AUM represents subordinated notes (equity) plus all drawn and undrawn debt tranches.

 

Consolidated Funds

 

Consolidated Funds refers collectively to certain Ares-affiliated funds, related co-investment entities and certain CLOs that are required under GAAP to be consolidated in our combined and consolidated financial statements.

 

Economic Net Income

 

Economic net income (or “ENI”) represents net income excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we believe are not indicative of our core performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization.

 

Distributable Earnings

 

Distributable earnings (or “DE”) is a pre-income tax measure that is used to assess amounts potentially available for distributions to stakeholders. Distributable earnings is calculated as the sum of Fee Related Earnings, realized performance fees, realized performance fee compensation expense, realized net investment and other income, and is reduced for expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes computed in accordance with GAAP as it is presented before giving effect to unrealized performance fee income, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles, equity compensation expense and is further adjusted by certain items described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures.”

 

Fee Earning Assets Under Management

 

Fee earning AUM (or “FEAUM”) refers to the AUM of our funds on which we directly or indirectly earn management fees. Fee earning AUM is equal to the sum of all the individual fee bases of our funds that contribute directly or indirectly to our management fees.

 

Fee Related Earnings

 

Fee related earnings (or “FRE”) is a component of ENI and is used to assess the ability of our business to cover direct base compensation and operating expenses from management fees. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and excludes performance fees, performance fee compensation, investment income from our Consolidated Funds and certain other items.

 

Incentive Generating Assets Under Management

 

Incentive generating AUM (or “IGAUM”) refers to the AUM of our funds that are currently generating, on a realized or unrealized basis, performance fee revenue. It generally represents the NAV of our funds for which we are entitled to receive a

performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee).

 

 

 

Incentive Eligible Assets Under Management

 

Incentive eligible AUM (or “IEAUM”) refers to the AUM of our funds that are eligible to produce performance fee revenue, regardless of whether or not they are currently generating performance fees. It generally represents the NAV plus uncalled equity of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee).

 

Operations Management Group

 

In addition to our four segments, we have an Operations Management Group (the “OMG”) that consists of five independent, shared resource Groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/information technology, business development, legal/compliance and human resources. The OMG’s expenses are not allocated to our four reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses this information to assess the performance of our reportable segments and our Operations Management Group, and we believe that this information enhances the ability of unitholders to analyze our performance.

 

Our Funds

 

Our funds refers to the funds, alternative asset companies and other entities and accounts that are managed or co-managed by Ares. It also includes funds managed by Ivy Hill Asset Management, L.P. (“IHAM”), a wholly owned portfolio company of ARCC, and a registered investment adviser.

 

Performance Related Earnings

 

Performance related earnings (or “PRE”) is a measure used to assess our investment performance. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and investment income earned from our Consolidated Funds and non-consolidated Funds.

 

Permanent Capital

 

Permanent capital refers to capital of our funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, which funds currently consist of Ares Capital Corporation (“ARCC”), Ares Commercial Real Estate Corporation (“ACRE”), Ares Dynamic Credit Allocation Fund, Inc. (“ARDC”) and Ares Multi-Strategy Credit Fund, Inc. (“ARMF”); such funds may be required, or elect, to return all or a portion of capital gains and investment income.

 

Total Fee Revenue

 

Total fee revenue refers to the sum of segment management fees and net performance fees.